Support for troubled banks calms markets

A look at the day ahead in European and global markets from Anshuman Daga

The week-long rollercoaster ride for global markets turned calmer and a little more positive on Friday as investors heaved a sigh of relief over efforts in the United States and Europe to backstop troubled lenders.

Asian stock markets clawed back 1.7% after after a 2.7% fall to more than three month lows since Monday.

Markets were relieved by moves by large U.S. banks to inject $30 billion in deposits into First Republic Bank on Thursday and rescue the lender caught up in a widening crisis triggered by the failure of two other mid-size U.S. lenders over the past week.

As promised, the European Central Bank raised interest rates by 50 basis points despite calls by some investors to hold back on policy tightening until the turmoil in the banking sector eases.

What seems to have changed is the guidance for rate hikes though many policymakers had suggested in recent weeks that sizeable increases were warranted.

On Friday, final CPI data for the eurozone is due in a thin calendar for economic data releases.

As risk sentiment improved, the dollar eased and risk-sensitive currencies strengthened.

Meanwhile, the Federal Reserve is set to continue its inflation-fighting campaign with a quarter-point hike in interest rates, that just days ago had looked doubtful due to the turmoil in the banking sector.

While Credit Suisse Group shares recovered most of the losses suffered on Wednesday after it said it would tap into a $54 billion loan from the Swiss National Bank, some analysts believe that the support has only bought the lender some time to work out what to do next.

Citing people with knowledge of the matter, Bloomberg News reported that UBS Group and Credit Suisse are opposed to a forced merger.

On the corporate front, Sanofi said it would cut U.S. list prices for its most-prescribed insulin product, Lantus, by 78% starting next year following similar moves by U.S. rivals.

Key developments that could influence markets on Friday:

Europe economic data: Eurozone final Feb CPI, Q4 labour costs